The Wall Street Journal began an article today:

The American financial system was shaken to its core on Sunday. Lehman Brothers Holdings Inc. said it would file for bankruptcy protection, and Merrill Lynch & Co. agreed to be sold to Bank of America Corp.

That's hard to top for drama. The dissolution of Lehman Brothers (LEH) follows on the heel of the governments take over of Fannie Mae (FNM) and Freddie Mac (FRE), and the government-aided acquisition of Bear Stearns in March. Last week, Lehman stunned Wall Street when it announced a quarterly loss of almost $4 billion and plans to break into two separate companies. That plan soon fell apart. Over the weekend, Bank of America considered buying Lehman but only if the Federal Reserve pitched in. The Fed refused. After some high stakes negotiations that could have come out of a Hollywood movie, it was finally decided that after 158 years of business, Lehman Brothers would be allowed to go bankrupt.

Ultimately, the problem for Lehman is that it was just too big for another firm to swallow. It also appears that the Fed has become uncomfortable with the perception that it will stand ready to bailout any major U.S. financial institution.

Remember this: When times are uncertain, investors revert back to fundamentals. This is especially true considering third-quarter earnings season is fast approaching. This favors my style of investing and I expect that my favorite stocks will continue to rally as institutional investors snap up those companies that will announced the strongest earnings.

We're now in the midst of quarter-end window dressing when the crème la crème rises to the top and institutional investors shun controversial stocks like AIG (AIG) and Lehman Brothers. Both stocks, along with Freddie Mac and Fannie Mae, were rated as Sells at PortfolioGrader Pro.